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The epidemic situation in COVID-19 has caused a sharp increase in social demand for infectious disease detection, which is the leading industry in market demand growth in recent years. What is the market size of the current testing market? What is the future development prospect of testing industry? This time, the straight flush expert group interviewed Mr. Song Zhenjin, Secretary of the Board of Directors of Botuo Bio (688767.SH), and talked about the rapid development of Botuo Bio in the past two years, the company’s future strategic planning and the industry market.
Guest introduction:Song Zhenjin, Secretary of the Board of Directors of Hangzhou Botuo Biotechnology Co., Ltd., used to be the department manager of Tianjian Certified Public Accountants (special general partnership) and the financial controller of Songdu Service Group Co., Ltd.
Interview details:
(1)
Straight flush expert group:Can you introduce the domestic market situation and future expectations of POCT industry?
Song Zhenjin, Director of Botuo Biology:At present, compared with the overseas market, the domestic market demand for POCT and family self-test products is far from being released. In the future, with the promotion of national graded diagnosis and treatment, the control of medical insurance fees, the popularity of family self-test and the COVID-19 epidemic, the public and government departments pay much attention to infectious disease detection, the domestic market demand is expected to be further released. From the perspective of industry market scale, the fastest growing year of POCT industry in China is 2020, with a growth rate of 24.70%. According to the data of China Blue Book of Medical Devices (2021), the market size of POCT industry in China will be around 9.3 billion yuan in 2020, and it is predicted that the market size of POCT in China will exceed 26 billion yuan by 2026.
(2)
Earth egg Niu Niu:What is the company’s current competitive advantage and moat?
Song Zhenjin, Director of Botuo Biology:The company has always focused on the field of POCT inspection, engaged in the research and development, production and sales of in-vitro diagnostic series products, committed to promoting the high-quality development of human diagnosis, and adhered to the concept of leaving complexity to itself and bringing convenience to users. The company’s current competitive advantages and moats mainly include the following points:
(1) It has the advantages of a mature and efficient technology platform. By using the latest modern biotechnology such as monoclonal technology, immunochromatography technology, protein coupling technology and nano-scale colloidal gold labeling technology, the company has established a reaction system for colloidal gold immunochromatography diagnosis and detection of target proteins or small molecular substances. Using this technology platform, a series of rapid detection products with high sensitivity and good specificity can be developed quickly, efficiently and stably.
(2) Mature R&D system and abundant technical reserves. Based on the mature rapid immunodiagnostic reagent product technology platform, aiming at the deficiency of the original immunochromatography technology such as colloidal gold in quantitative detection, the company successfully developed 18 reagents such as myocardial series, inflammatory series and sex hormone series during the reporting period, and obtained relevant registration certification, realizing the rapid quantitative detection of related biomarkers. At the same time, the company has rich technical reserves. In terms of technical route, the company has carried out technical layout based on the molecular diagnosis technology platform, and has reserved key technologies related to molecular diagnosis products such as rapid nucleic acid extraction technology, multiplex fluorescent quantitative PCR technology, ARMS-qPCR technology, RT-LAMP technology and extraction-free rapid fluorescent PCR technology, and has developed molecular diagnosis products such as multiple nucleic acid detection reagents for respiratory infectious diseases. In the field of chemiluminescence, The company uses magnetic particle chemiluminescence technology to build a fully automatic chemiluminescence detection platform. In the research field of microfluidic technology, the company will focus on promoting the layout of micro total analysis system technology in fluorescence immunoassay and nucleic acid detection product lines, and focus on the application of high-sensitivity detection technology in non-laboratory environment. On the product line, the company’s products have expanded from qualitative to quantitative, and immunology to molecular diagnostics; The animal disease detection technology platform has realized the extension of the company’s detection products from human medical diagnosis to animal medical diagnosis.
(3) A stable R&D team with international vision. The company has established a technology research and development center in San Diego, USA, which is at the forefront of the world biomedical engineering science and technology field, laying a good foundation for the subsequent training of various R&D talents, and undertaking the functions of absorbing the most advanced technology in the international biomedical engineering science and technology field and cultivating senior R&D talents. During the reporting period, the company was awarded the Zhejiang Provincial Enterprise Research Institute. By June 30, 2022, the company had obtained a total of 201 intellectual property rights, including 162 domestic and 39 overseas, including 12 invention patents, and the R&D investment was 69,309,500 yuan, an increase of 155.72% over the same period.
(4) Rich product lines and complete registration and certification advantages. As major countries in the world have clear access thresholds and strict regulatory measures for the production, registration and circulation of in-vitro diagnostic products, they can only be sold in the local market after obtaining the corresponding product qualification certification. The company has a professional domestic and foreign product registration team and is familiar with domestic and foreign laws, regulations and registration procedures. By the end of June 2022, the company had 327 EU CE certificates, 3 FDA 510(k) certificates, 1 Australian TGA certificate, 1 Thai FDA THAILAND certificate and 1 Brazilian ANVISA certification. At the same time, the company has 40 NMPA certificates in China (including 30 third-class certificates). The continuous enrichment of product line series and relatively complete product certification have laid a solid foundation for the company’s products to open the global POCT market and enhance the global market share.
(5) Advantages of marketing channels. The company’s marketing network has covered five continents and nearly 120 countries or regions around the world, with a group of very high-quality customers who have maintained long-term and stable cooperation. With the good reputation and channels of COVID-19 antigen products, the company has developed many new markets and new customers such as Russia, Australia, Canada, Mexico, Argentina, Peru, Colombia and Ecuador. In the post-epidemic era, the company can quickly push non-COVID-19 products to the above markets, thus bringing new sales performance. In the international market, many of the company’s own brands, such as Right Sign, have won the export famous brand in Zhejiang Province for many years, which has a high reputation and has been widely recognized by customers. Advin Biotechnology, an American subsidiary, is the company’s R&D and sales center in the United States, providing localized production and services, ensuring that the company keeps up with the technological development trend of the global in vitro diagnosis industry and continues to provide customers with technologically advanced and high-quality products and services. In the domestic market, the company’s sales network has basically covered major provinces in the country and has a relatively stable customer channel. The company’s products have been online in Jiangsu, Zhejiang, Guangdong, Anhui and other provinces that have provincial-level sunshine procurement or medical reagent consumables platforms, and have a certain popularity and customer recognition. Drug testing products have been selected as qualified suppliers and product catalogues of drug testing kits selected by the Ministry of Public Security. Detection products such as Helicobacter pylori and hepatitis B have been widely used in screening and evaluation projects of high-risk groups in various provinces and cities.
(6) Development and self-production capacity of core biological raw materials. Establish a biological core raw material technology platform, and form an overall biological raw material technology platform composed of multiple technologies. Including antigen coupling technology, gene recombinant protein expression technology, monoclonal antibody development technology and so on. We have developed a series of core raw material products, including cocaine antigen, ethyl glucuronide antigen, pregabalin antigen, clozapine antigen, anti-human red blood cell antibody, anti-morphine antibody, fentanyl antibody and anti-ethyl glucuronide antibody. Bochuang Bio, a subsidiary, is mainly engaged in the research and development of biological raw materials, forming a research and development team of about 20 people. Up to now, the company’s five series of products: 20% specific biological raw materials have achieved self-production substitution, and the goal of self-sufficiency in important raw materials will be achieved in the future.
(3)
Straight flush expert group:Based on the global epidemic prevention and control situation and current policy trends, what is the next development plan of the company’s COVID-19 business?
Song Zhenjin, Director of Botuo Biology:With the normalization trend of COVID-19 epidemic overseas, our company has combined the routine business detection products of infectious diseases with COVID-19 products, and has developed multi-inspection products of infectious diseases such as COVID-19 and influenza and obtained CE certificates. In addition, our company will develop new detection forms of COVID-19 detection products to further broaden the quality and variety of COVID-19 detection products. In terms of registration, the company has applied to the US FDA for registration of COVID-19 antigen OTC products, which is currently awaiting approval. In terms of raw materials, the company gradually replaced the self-produced raw materials on the core biological raw materials of COVID-19 products, reducing the production cost and improving the product performance. On the market side, we are also seeking to promote the bundled cooperation mode with high-quality customers and further increase the market share of our products in the local market. In terms of brand, the company is further expanding the marketing channels of COVID-19’s own brand, and further increasing the word-of-mouth construction of the company’s own brand.
(4)
Straight flush expert group:The company’s performance has grown rapidly in the last two years. Can you share the company’s growth strategic plan in the post-epidemic era?
Song Zhenjin, Director of Botuo Biology:The company’s future growth plan mainly includes the following points:
1. Drug detection products,
1) With the further expansion of the traditional dominant market, the drug testing market in the United States will grow greatly in the future. The legalization of some cannabis states will lead to the growth of the consumption population of cannabis drugs, which will further generate a large number of testing demands. The newly developed and competitive product, the prototype product of cannabis saliva, will continue to increase in the American market. In the future, we will also strive to introduce more advantageous products to the market.
2) Explore new regional markets. The new markets developed by the company, such as Russia, Australia (including Australia and New Zealand), Canada and Mexico, are making continuous efforts. Russia is one of the major drug testing markets in the world, and has cooperated with Russian customers and started to sell.
2. With the normalization of epidemic situation, the demand for routine infectious disease detection products has recovered, and the periodic outbreak of influenza and Covid-19 have spawned the demand for multiple detection. The company has developed multiple detection kits for influenza A and B and COVID-19, and obtained certificates and other multiple detection products to meet the market demand.
3. The existing five series of product categories and technical upgrades, such as fluorescent immunoassay products, have obtained more than 20 certificates at present, and more fluorescent immunoassay products will be put on the market in the future. Molecular diagnostic products and products of animal disease detection platform are getting certificates one after another, and considering the research projects and products of many companies at present, expanding these new products, new markets and adding new customers will become the driving force for the revenue growth of non-COVID-19 products in the future.
(5)
Straight flush expert group:What is the layout direction of animal testing market and the competitive advantage in the same industry? What’s the strategic arrangement?
Song Zhenjin, Director of Botuo Biology:At present, the global veterinary testing market is about 40 billion US dollars, and in 2020, there will be about 8 billion domestic veterinary in vitro testing market, including 3 billion in the breeding animal market and 5 billion in the pet testing market, with a compound annual growth rate of 17%. At present, the domestic pet disease detection products are small in volume, but the unit price and profit are good, and the demand for pet disease detection is also increasing rapidly. In addition, in terms of the demand for inspection of cultured animals, animal infectious diseases such as swine fever and avian influenza have obvious fluctuations, which requires the company to have the ability of rapid research and development and response. The company is very optimistic about the potential market of animal disease detection. Based on the animal disease detection platform, we have formed detection products such as canine distemper virus detection reagent, canine coronavirus detection reagent and canine parvovirus detection reagent. At the same time, the company has also made sufficient technical reserves in the detection of avian influenza and other animal diseases.
(6)
Straight flush expert group:What is your understanding and opinion on the future development trend of in vitro diagnosis industry, and what are the main strategies at the company level?
Song Zhenjin, Director of Botuo Biology:COVID-19 has changed the trend and pattern of IVD industry all over the world. The outbreak of Covid-19 has made POCT in vitro diagnostic kit with high detection speed and low detection cost an important means to detect Covid-19, and at the same time, it has also changed and cultivated people’s cognition and usage habits of quick diagnosis products. It is believed that in the future, with the attention and policy support of governments and medical systems in various countries for sudden public health emergencies, the global in vitro diagnostic kit will usher in rapid development. COVID-19 has also brought great opportunities to the company’s development. At this stage, we mainly accumulate and precipitate the cash flow, brand and channel advantages brought by COVID-19, and transform them into the company’s technological advantages and brand advantages to enhance the company’s overall competitiveness. In the future, the company will continue to increase capital investment in the research and development of core biological raw materials in the IVD field, expand raw material research and production business, achieve self-sufficiency in important raw materials, accelerate the industrialization process of new platforms such as molecular diagnosis platform, animal disease detection technology platform and microfluidic technology platform, upgrade the mature rapid immunization technology platform products, continuously launch a series of differentiated and competitive new products, and increase investment in channel construction. Deeply cultivate key markets such as North America, Europe and Asia, and further explore and develop new markets. In addition, according to the characteristics of the industrial chain and the development direction of the industry, the company will also consider industrial investment, mainly looking for high-quality targets that can complement the company in technology, strategy and products, thus enhancing the company’s core competitiveness.
Network Information Office of Yuhang District Committee, Yuhang District Development and Reform Bureau (Financial Office) and Flush into six listed companies in Yuhang are in progress, and interviews will be released in October, so please pay attention!